Buy-to-let sales help boost profits at OneSavings Bank

OSB, the parent company of Kent Reliance, InterBay Commercial, Prestige Finance and Heritable Development Finance, saw its pre-tax profits grow to £137m for 2016, up from £105.9m in 2015.

Its gross originations rose by 28% to £2.3bn, from £1.8bn in 2015. The bank says the growth was due primarily to an increase in new lending in the buy-to-let/SME segment.

The group increased its buy-to-let lending in 2016 to £1.9bn, an increase of 27% on the £1.5bn of new organic lending it did in 2015. This, it said, included a significant increase in buy-to-let lending through its Kent Reliance and InterBay brands.

The bank saw a clear trend for borrowers seeking to mitigate changes to personal tax during the year. It said there was a continued increase in the proportion of applications from limited companies for its main buy-to-let brand Kent Reliance from over 40% in December 2015 to 57% in the second half of 2016.

Due to competitive pressure in the second charge market during 2016, it said it had allowed Prestige Finance’s market share to fall, to ensure it continued to price for risk. The second charge residential loan book was down as at 31 December 2016 with a gross value of £487.2m, compared to £517.8m in 2015.

The bank said residential mortgages made a contribution to group profit of £59.5m in 2016, down 2% on the £60.7m in 2015. In June 2016, the bank said it implemented a revised mortgage product transfer scheme – Choices – to encourage greater levels of retention amongst those borrowers reaching the end of their initial product term. Under this programme, borrowers were encouraged to engage with their broker to receive advice and select from a bespoke product set. Since the implementation of the scheme, the bank said there has been a significant increase in the number of borrowers choosing a new product within three months of their initial product ending.

The group also continued to use the Bank of England’s Funding for Lending Scheme. Total drawings to 31 December 2016 under the scheme stood at £524.6m. In November 2016, the group was accepted into the Term Funding Scheme and expects to transition out of the FLS into this new facility over the course of 2017 given the more attractive terms. As at 31 December 2016, TFS drawings were £101m and the group anticipates the total to reach £1bn by the end of 2017.

The group grew its total loan book by 16% in 2016 to £5.9bn, up from £5.1bn in 2015.

Andy Golding, chief executive officer of OneSavings Bank, said the lender had achieved particularly strong growth in its core buy-to-let lending sub-segment as the market became more focused on its professional landlord audience.

He said: “We enhanced our core residential segment through selective asset acquisition and I am very pleased that we also increased our capital ratio following the sale of our economic interest in the Rochester Financing No. 1 plc securitisation, as well as through our profitable organic origination. We have grown the commercial side of our buy-to-let/SME segment cautiously and we have been prudent in business areas exposed to cyclical uncertainty, such as residential development finance, through increased stress testing measures in these sub-segments.”